Stephen Milan retires from the Fed. How he set the stage for Kevin Warsh.

Federal Reserve President Stephen Milan came in with big ideas about how central banks should change, in some cases fundamentally. As he prepares to step down in the coming days after the shortest tenure as governor in 71 years, he seems convinced he’s right.

But Millan, 42, said in an interview with CNBC that the realities of working at the Fed have tempered his views on how quickly such changes can be made. Change is slower than he imagined.

Millan said the Fed is “actually a commission.” “It’s not like an agency where you have a very clear executive who just runs the show, and you do what he says and if you don’t like it, you’re out.”

This observation is important for two reasons. The first is that Millan could return as governor, potentially before President Donald Trump’s term ends. Second, incoming chair Kevin Warsh also shares some of Milan’s big ideas.

Mr. Warsh was confirmed as the company’s next chairman on Wednesday and will take the board seat vacated by Mr. Millan. The two do not overlap.

But Mr. Warsh will need to consider the reality that Mr. Milan encountered. The Federal Reserve is full of people with unique economic ideas, and change in the system is often glacial.

“You have to convince people,” Millan said. Milan will take office in September 2025, filling the seat vacated by Adriana Kugler.

Mr. Millan said that despite sharp criticism from outside the building that he posed a threat to the Fed’s independence, Fed policymakers and staff have treated his ideas with generosity.

He initially chose not to resign from his position as chairman of the White House Council of Economic Advisers under the Trump administration while working at the Fed. He said the decision was aimed at avoiding problems that could have resulted in a third Senate confirmation in a short period of time, but the decision fell short amid President Trump’s campaign to undermine Powell.

Milan resigned from his White House position in February and has no immediate plans to return.

He claims his critics have it backwards. He was valuable to the president because he examined the economic evidence and concluded that interest rates were too high. “I did the math,” he said. “I’ve always done what I thought was right.”

Mr. Millan will end his term at the Fed with the rare record of speaking out against all six Fed meetings he attended. This is consistent with President Trump’s call for a significant reduction in interest rates. Even when the Fed cut interest rates, Mr. Millan opposed them in favor of deep rate cuts.

Even after leaving the Fed, Mr. Millan has not significantly changed his view that interest rates can and should be lowered significantly.

“If I had written the dots today, it might be one less reduction than what I outlined in my last economic outlook,” he said. That “dot” on the grid of individual Fed members’ interest rate forecasts called for a full percentage point, or 100 basis point, rate cut this year, or three-quarters of a point more than the median of their Fed colleagues.

Millan said that because of the rate cuts the Fed has already made and because “we’ve started to look at the data and become a little bit concerned about inflation,” he will now request that the Fed rescind just one quarter-point rate cut, or lower rates by three-quarters of a point. But he added: “We still think it’s important to bring forward the cuts because we still think there should be no restraints on the labor market.”

Mr. Milan’s push for rate cuts is based on several other factors, but many are the result of administration policies that he believes will curb inflation and allow the Fed to run the economy with low interest rates.

First is his belief that the administration’s deregulation will have a positive impact on the economy.

“I think regulation is still being underestimated in terms of how decisive it is for the supply side,” he said. “It’s day and night to say you’re not allowed to build, you’re allowed to build…Deregulation, which boosts the supply side by allowing producers to produce more at less cost, is what eliminates inflation.”

He estimates that deregulation could reduce future inflation by half a percentage point, although he acknowledged that the uncertainty created by tariff inflation could dampen some of the rise in inflation.

Some of his colleagues want to spend time researching the concept before incorporating it into policy, but he believes some have been converted. “I still think it’s more important than most people, but I’m a lot closer to my thoughts now than I was in September,” he said.

These colleagues likely haven’t heard the last word on the potential benefits of deregulation. Warsh, who was nominated to chair the Fed, called President Trump’s deregulatory plan “the most significant since President Ronald Reagan.”

Mr. Milan’s views on the veracity of inflation data are another key pillar of his argument for lower interest rates. In a future paper, Mr. Milan, along with two other Fed economists, will argue that recent software inflation has been artificially inflated by technological factors, distorting the headline and core numbers.

Perhaps the most important of Mr. Milan’s ideas is how he thinks central banks should think about the appropriate policy response to spikes in inflation in response to supply shocks, such as the current rise in oil prices. He said it takes about 12 to 18 months for Fed policy changes to have an impact on the economy. This puts limits on the types of price movements the Fed should be concerned about today, he said.

Think of clothing companies that have had to raise prices to account for the cost of tariffs, Millan said.

“If you think higher tariffs are going to make clothing more expensive today, there’s nothing monetary policy can do about that,” Milan said. The same goes for the oil shock caused by the Iran war. While it may drive up individual prices today, the kind of inflation the Fed should consider is a continuing trend of rising prices, not a one-time event.

“The thing about supply shocks is that we need to anticipate further supply shocks,” he said.

The concern with Mr. Milan’s approach is that if the Fed continues to watch for supply shocks, markets and the public will doubt the credibility of the Fed’s inflation policy.

It’s unclear whether Mr. Millan persuaded other Fed members to follow his view. At the most recent meeting, three opponents said they were concerned about inflation.

But they will soon find louder voices around the boardroom table making the same argument.

At his April 21 confirmation hearing, Mr. Warsh said he echoed Mr. Millan’s view that the Fed has stumbled on micro-level price analysis.

“What I’m most interested in is, not temporary changes in prices due to changes in geopolitics or changes in beef, but what is the underlying inflation rate, but what are the underlying changes in general prices in the economy?” he said.

It seems likely that Mr. Millan will continue to actively participate in Fed discussions even after leaving office. He had written frequently about monetary policy before joining the Fed, and spent the final weeks of his short term working on a research paper on software inflation.

“I would love to come back,” Milan said. “But that’s not up to me.” The White House declined to comment on whether President Trump is considering it.

Outgoing Chairman Jerome Powell has said he will remain in office at least until a review of renovations to the Fed’s headquarters is completed. Mr. Powell has not specified a deadline for his retirement, and his term ends in January 2028, but if he steps down early, a seat on the board will become vacant.

If he were to return, the consequences would be significant for Mr. Warsh, who, as Mr. Milan found out, would need allies around the Fed table.